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A consensus that has been oft-repeated lately is that Peak Season is likely to fall short of previously promising expectations. That was one of the main takeaways from a recent report published by the Tompkins Supply Chain Consortium, entitled Peak Season Trends and Strategies Survey Report.

The report was based on feedback from roughly 80 retailers, manufacturers, and wholesalers and distributors, and the findings were initially released at Tompkins’ Supply Chain Leadership Forum in September.

When looking at Peak Season strategies, the report found that more than 40 percent of the report’s respondents have lowered the amount of SKUs (stock-keeping unit) they are selling.

The report’s authors explained that this reduction is because “wounds from the 2008 and 2009 holiday season are still fresh in the minds of retailers and consumer product manufacturers.” And they added that more than 1 in 3 respondents reported plans to stock fewer items in an effort to hedge against past situations like the deep end-of-season discounts of 2008 and the willingness to incur stock-outs in 2009.

“To me, this was the single most surprising aspect of the results,” said Chris Ferrell, Director, Tompkins Supply Chain Consortium, in an interview. “SKU proliferation is a decades-long trend, and to see a substantial number of companies retrenching was—speaking strictly as a supply chain professional—a pleasant surprise.”

When asked if shippers have learned their lessons from previous years when it comes to preventing another significant inventory overhang, Ferrell explained that it is somewhat difficult to determine if the SKU rationalization represents a lesson learned or just an intelligent means of hedging a bet in uncertain times.

If the economy were to come roaring back in the next 12 months, he said it is very likely there would be a return of unchecked SKU proliferation, but that in uncertain times reducing the marginal items in favor of putting your extra inventory into sure-fire winners is a sound strategy.

When it comes to building up inventory levels in advance of Peak Season, the survey found that 11.1 percent plan to do so in June or earlier, with another 13.3 percent in early August and 22.2 percent in late August, and 15.6 percent in late October or November. Rounding out the top five were early September, late September, and early October, each coming in at 8.9 percent. And early July and late July hit 4.4 percent and 6.7 percent, respectively.

“The inventory results showing that 11 percent were beginning their build in June are not surprising,” said Ferrell. “Longer, more complex global supply chains and a year that began with a lot more economic promise and a very uncertain transportation climate were likely contributors to the issue. But really, the trend of longer, slower, earlier inventory builds ahead of peak season has been evolving since 2005, if not earlier.”

Among the highest responses from survey respondents regarding network variables for managing Peak Season operations compared to last year, improved supply chain integration and personnel experience topped the list at 59.1 percent and 58.1 percent, respectively. Also in the top five were network flexibility: contingency plans at 39.5 percent, planning processes or forecasting capabilities at 37.3 percent, and planning tools at 31.8 percent.

While it is likely to early to gauge the end result of the 2011 Peak Season, Ferrell said that “muted” is a good term of explaining how things may turn out.

“If the economy was to pick up substantially and peak season was to turn out dramatically better than what is currently expected in a broad way, I don’t think retailers or their suppliers would be able to completely catch up,” he said. “That’s a problem I’m sure a lot of companies would love to try and solve, though.”

At last week’s Council of Supply Chain Management Professionals (CSCMP) Annual Conference in Philadelphia CEVA Logistics CEO John Pattullo said that at the moment there is only a modest upturn occurring as a result of Peak Season activity and is less than a conventional Peak Season.

This sentiment also rang true in recent research by Drewry Consultants, which stated that Transpacific ocean spot rates are declining, with rates down more than 30 percent compared to a year ago.

The current scenario regarding Peak Season is decidedly different from a Logistics Management readership survey conducted in early June. That survey found that 78 percent—or 367 of the 469 respondents expected a Peak Season this year, with another 45 percent—or 195 respondents—expecting it to be more active than a year ago, followed by 20 percent (87 respondents) calling for it to be less active, and 34 percent (147 respondents) expecting it to be the same as last year.

About the Author

Jeff BermanGroup News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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